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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER PER H.S. SIDHU : JM
This Appeal is filed by the Assessee against the Order dated 24.12.2013 of the Ld. CIT(A)-XXXIII, New Delhi relevant to assessment year 2006-07 on the following grounds:-
1. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not quashing the assessment
order passed u/s. 153A despite there being no search u/s. 132 of the I.T. Act, 1961 on the appellant.
2. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in confirming the action
of Ld. A.O. in assuming jurisdiction to pass impugned assessment order under section 153A, more so in making impugned disallowance which ought not to have been made under the law.
That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts and in confirming the action of the AO in making disallowance of a sum of Rs. 4,63,250/- under provisions of the section 40A(3) of Income Tax Act, 1961, more so when there was no incriminating material found during the course of search.
That in any case and in any view of the matter, action of the Ld.
CIT(A) in confirming the action of AO in making the impugned disallowance of Rs. 4,63,250/- under the provisions of section 40A(3) and framing the impugned assessment order is bad in law and contrary to facts and circumstances of the case, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds.
That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of the Income Tax Act, 1961. 2
6. That the appellant craves the leave to add, modify, amend or delete
any of the grounds of appeal at the time of hearing and all the above grounds are prejudice to each other.
The brief facts of the case are that a search and seizure operation u/s. 132 of the I.T. Act, 1961 was carried out on 21.01.2011 in DS Group of cases. M/s Dharampal Satyapal Group is engaged in manufacturing and trading of chewing tobacco and premium pan masala besides other businesses. The group is also involved in Food Products, Packing, Hospitality, Rubber, Steel and Education business. In response to the statutory notice u/s. 153A issued on 27.9.2012, the assessee company filed its return of the income on 10.10.2012 declaring loss of Rs. 34,347/-. In response to the notice and a questionnaire, the AR of the assessee attended the hearing and filed the details. The stated main objects of the assessee company are purchase, sale, exchange, lease, mortgage, hire, lands or immovable or movable property and real estate promotion. During the FY 2005-06, the assessee company has made purchases of land aggregating to Rs. 4,91,26,711/- from various persons. Out of the said payment, an amount of Rs. 23,16,252/- has been paid to various persons in cash. Since, the payments in cash have been made in excess of the limit prescribed u/s. 40A(3) of the Income Tax Act, the explanation of the assessee was sought and the in response to the same, assessee filed the written explanation on 31.12.2012. After considering the same, AO observed that since the assessee made the payments aggregating to Rs. 23,16,252/- to various persons in cash during the FY 2005-06, therefore, under the provisions of section 40A(3) of the Income Tax Act, 1961, 20% of the said expenditure which comes to Rs. 4,63,250/- was added back to the total income of the assessee company and assessment was completed an income of Rs. 4,28,900/- vide his order dated 22.1.2013 passed u/s. 153A of the I.T. Act, 1961.
3. Against the aforesaid assessment order dated 22.1.2013, assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 24.12.2013 has dismissed the appeal of the asseseee.
4. Aggrieved with the order of the Ld. CIT(A), the Assessee is in appeal before the Tribunal.
5. At the threshold, Ld. Counsel of the assessee stated that the issues in dispute relating to upholding the validity of the order of assessment passed u/s. 153A on 22.1.2013, is squarely covered in favor of the assessee by the decision dated 28.8.2015 of the Hon’ble Delhi High Court passed in the case Commissioner of Income Tax vs. Kabul Chawla reported (2016) 380 ITR 573 (Del.) wherein the Hon’ble High Court has held that if the additions are made, but not based on any incriminating material found during search operation, then these additions are not sustainable in the eyes of law. He further stated that the additions have no relation with any incriminating material found and undisclosed income or property discovered in the course of search and as such 4 are bad in law being beyond the scope of jurisdiction u/s. 153A of the I.T. Act.
In support of his contention, he filed a copy of ITAT, ‘E’ Bench, New Delhi decision dated 8.8.2016 in the case of M/sManas Dwellers Pvt. Ltd. vs. DCIT for the AY 2006-07 passed in by which the issue in dispute is squarely covered.
At the time of hearing, Ld. DR relied upon the order of the authorities below and stated that the provision of section 153A has rightly been applied in the case of the assessee on the material available with them. Hence, the appeal of the Assessee may be dismissed.
We have heard both the counsel and perused the relevant records available with us, especially the orders of the revenue authorities and the cases referred by the Ld. Counsel of the Assessee in the shape of Paper Book. We find that the additions made by the AO are beyond the scope of section 153A of the Income Tax Act, 1961, because no incriminating material or evidence had been found during the course of search so as to doubt the transactions. It was noticed that as on the date of search i.e. 21.1.2011, no assessment proceedings were pending for the year under consideration and the AO was not justified in disturbing the concluded assessment without there being any incriminating material being found in search. In fact, in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee, leave alone the question of any incriminating material for the year under appeal. Therefore, in our considered opinion, the action of the AO is based upon conjectures and surmises and hence, the additions made is not sustainable in the eyes of law, because this issue in dispute is now no more res- integra, in view of the decision dated 28.8.2015 of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs. Kabul Chawla (2016)
380 ITR 573 (Del.) wherein the Hon’ble High Court of Delhi has held has under:-
“37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned 709 and 713 of 2014 of decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six Ays immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”. iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an 709 and 713 of 2014 of assessment has to be made under this Section only on the basis of seized material.” v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word
'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each
AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On
the date of the search the said assessments already stood completed.
Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”
Respectfully following the precedent of the Hon’ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, as aforesaid, we allow the appeal of the Assessee, because AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record. Hence, the addition in the case is deleted and the ground raised by the assessee in the appeal is allowed.
In the result, the Appeal filed by the Assessee stand allowed.
Order pronounced in the Open Court on 24/03/2017.